Summary: DUBAI -- The Qatar Central Bank said on Tuesday it wants
to keep interest rates low to support lending to the real economy, and
also reported that local banks have low exposure to the debt
crisis-stricken eurozone.

DUBAI -- The Qatar Central Bank said on Tuesday it wants to keep
interest rates low to support lending to the real economy, and also
reported that local banks have low exposure to the debt crisis-stricken
eurozone.

Pending a successful resolution of the sovereign debt problems in
Europe, global liquidity conditions could tighten from increased risk
aversion, which could have an impact on investments and project
financing in Qatar," the central bank said in its 2011 financial
stability review.

"In this context, sustaining the regime of soft interest rates
through proactive liquidity management continues to remain a key
priority for supporting growth."

The central bank cut its overnight deposit rate by a combined 75
basis points in April and August 2011 to a current level of 0.75 percent
to discourage banks from parking excess money at its accounts, support
lending in the real economy and bring the rate closer to its US
benchmark.

Since the Qatari riyal is pegged to the dollar, the central bank
cannot keep too large a gap with US rates without inviting capital
inflows.

The central bank also took several steps to drain excess money last
year. In January 2011 it issued a QR50 billion ($14 billion) bond
directly to local banks, and in May and August, it launched monthly
auctions of 91-, 182- and 273-day Treasury bills.

As a result, available liquidity in the Opec member's
financial system dropped to a mere QR5.8 billion at the end of 2011 from
73.2 billion a year before, the review showed.

In its analysis of risks stemming from the eurozone turmoil, the
central bank said that total exposure of Qatari banks to Europe was
around five per cent of their aggregate assets.

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